It has been about a month since the last earnings report for Ashland (ASH) . Shares have added about 4% in that time frame, underperforming the S&P 500.Will the recent positive trend continue leading up to its next earnings release, or is Ashland due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts. Ashland's Earnings & Revenues Surpass Estimates in Q2A ...

Core Viewpoint - The S&P 500 is nearing 52-week and all-time highs, up nearly 12% year-to-date, making it a favorable environment for investors seeking breakout stocks [1] Group 1: Breakout Stock Candidates - Boot Barn Holdings (BOOT) has increased by 54% over the past year, currently trading at a 52-week high of $115.97, with a market cap of $3.3 billion and 12 of 14 analysts rating it a Buy with a target price of $116 [2][3] - Essential Properties Realty Trust (EPRT) is up 10.7% over the past year, trading above 98% of its 52-week high of $27.70, with a market cap of $4.8 billion and 11 of 13 analysts rating it a Buy with a target price of $28.46 [5][6] - Ashland (ASH) has risen 8.6% over the past year, trading at almost 99% of its 52-week high of $99.55, with a market cap of $4.9 billion and 9 of 12 analysts rating it a Buy with a target price of $110 [7][8] Group 2: Company Financials and Operations - Boot Barn's sales rose 0.6% to $1.67 billion for the year, with an expected sales growth of 4.0% to 6.1% in Q1 2025, although its operating margin fell by 200 basis points to 11.9% [2][3] - Essential Properties Realty Trust has a high occupancy rate of 99.9% across 1,937 properties leased to 383 tenants, with the top three industries by revenue being car washes (15.1%), early childhood education (11.6%), and quick service restaurants (10.7%) [5][6] - Ashland's remaining businesses provide specialty additives and materials across various markets, and it trades at a valuation of 22.0x the estimated earnings of $4.46 per share for fiscal 2024 [8]

Group 1: Company Overview - Ashland Inc. announced an agreement to sell its nutraceuticals business to Turnspire Capital Partners LLC, with the deal expected to close in the third quarter of 2024, pending standard closing conditions [1] - The nutraceuticals business provides a range of active ingredients and formulation aids, along with custom formulation and contract manufacturing services, operating from four production sites in the U.S. and Mexico [1] Group 2: Financial Performance - In the second quarter of fiscal 2024, Ashland reported profits of $120 million or $2.39 per share, with adjusted earnings per share dropping to $1.27 from $1.43 year-over-year [2] - Sales for the quarter totaled $575 million, reflecting a 4.6% decline year-over-year primarily due to lower pricing [2] - For the fiscal third quarter, Ashland projects sales between $560 and $580 million and anticipates adjusted EBITDA in the range of $138-$148 million [2] - The company forecasts full fiscal year sales between $2,150 million and $2,225 million, with adjusted EBITDA expected to be between $470 million and $500 million [2] Group 3: Stock Performance - Ashland's shares have increased by 10.5% over the past year, contrasting with a 10.2% decline in the industry [2] - The company currently holds a Zacks Rank 3 (Hold) [3]

Core Insights - Ashland Inc. has appointed Ashish K. Kulkarni to its Board of Directors, effective May 6, 2024, to enhance its leadership in technology and innovation [1][2][3] - The Board size has increased to 11 members in anticipation of potential retirements, reflecting a proactive approach to governance [2] Group 1: Appointment Details - Ashish K. Kulkarni is the CEO of Kebotix, a startup focused on AI methods for new material commercialization, and has held significant roles in major companies like GAF, Avantor, and Celanese [1][2] - Kulkarni will serve on the Board's Environmental, Health, Safety and Quality, and Compensation Committees, bringing extensive experience in building innovation cultures [1][2] Group 2: Strategic Implications - The addition of Kulkarni is expected to provide unique perspectives that will aid Ashland in executing its strategy for portfolio growth and scalable advancements [3] - The company emphasizes its commitment to innovation and customer loyalty, aiming for increased market share and profitability through enhanced leadership [2][3] Group 3: Company Overview - Ashland Inc. operates as a global additives and specialty ingredients company, serving diverse markets including construction, energy, and pharmaceuticals [4] - The company employs approximately 3,800 professionals dedicated to developing innovative solutions for complex customer challenges across more than 100 countries [4]

Core Insights - Zacks Premium provides tools for investors to enhance their stock market strategies, including daily updates on Zacks Rank and Style Scores [1][4] - The Zacks Style Scores categorize stocks into Value, Growth, Momentum, and VGM Scores, helping investors identify stocks with the best potential for market outperformance [2][3] Zacks Style Scores - **Value Score**: Focuses on identifying undervalued stocks using financial ratios like P/E and Price/Sales [2] - **Growth Score**: Evaluates a company's financial health and future growth potential based on earnings and sales projections [2] - **Momentum Score**: Assesses stocks based on price trends and earnings estimate changes to identify favorable buying opportunities [2] - **VGM Score**: Combines the three Style Scores to highlight stocks with attractive value, growth, and momentum characteristics [3] Zacks Rank - The Zacks Rank is a proprietary model that uses earnings estimate revisions to guide investors in stock selection, with 1 (Strong Buy) stocks achieving an average annual return of +25.41% since 1988 [4] - Investors are encouraged to focus on stocks with a Zacks Rank of 1 or 2 and Style Scores of A or B for optimal returns [5] Company Spotlight: Ashland Global Holdings Inc. (ASH) - Ashland is a leading specialty chemicals company with a diverse portfolio serving various markets, including automotive and pharmaceuticals [6] - ASH currently holds a Zacks Rank of 3 (Hold) and a VGM Score of B, with a Momentum Style Score of A [6] - The stock has seen a 1.1% increase over the past four weeks, and earnings estimates for fiscal 2024 have been revised upwards by four analysts, increasing the consensus estimate by $0.14 to $4.47 per share [6][7]

Company Overview - Ashland (ASH) is currently ranked 2 in the Zacks Sector Rank for Basic Materials, indicating strong performance relative to its peers [1] - The Zacks Rank system highlights stocks with favorable earnings estimates and revisions, with Ashland holding a Zacks Rank of 2 (Buy) [1] Earnings Performance - The Zacks Consensus Estimate for Ashland's full-year earnings has increased by 5.2% in the past quarter, reflecting improved analyst sentiment [2] - Year-to-date, Ashland's stock has gained approximately 13.7%, while the average loss for Basic Materials stocks is 2.5%, showcasing Ashland's outperformance [2] Industry Comparison - Ashland is part of the Chemical - Specialty industry, which has seen an average loss of 21.4% this year, further emphasizing Ashland's strong performance [3] - In contrast, Buenaventura (BVN), another outperforming stock in the Basic Materials sector, belongs to the Mining - Silver industry, which has gained 10.2% this year [3]

Core Insights - Ashland Global Holdings Inc. reported second-quarter fiscal 2024 profits of $120 million or $2.39 per share, an increase from $91 million or $1.67 in the prior-year quarter. Adjusted earnings were $1.27 per share, down from $1.43 year-over-year, but exceeded the Zacks Consensus Estimate of $1.19 [1] - Sales decreased by 4.6% year-over-year to $575 million, slightly surpassing the Zacks Consensus Estimate of $574.2 million, primarily due to softer pricing [1] Segment Highlights - **Life Sciences**: Sales fell 7.5% year-over-year to $222 million, below the Zacks Consensus Estimate of $238.1 million. Nutrition end market volumes showed modest growth but were lower than the previous year [2] - **Personal Care**: Sales increased by 1.2% year-over-year to $169 million, exceeding the Zacks Consensus Estimate of $159.3 million, driven by higher volumes in skin care, oral care, and hair care [2] - **Specialty Additives**: Sales declined 2.5% year-over-year to $157 million, surpassing the Zacks Consensus Estimate of $149.5 million, with higher volumes in coatings offset by lower pricing [3] - **Intermediates**: Sales dropped 21.5% year-over-year to $40 million, slightly beating the consensus estimate of $39 million, primarily due to lower prices [3] Financials - Cash and cash equivalents were $439 million at the end of the quarter, a 10% increase from the previous year. Long-term debt remained flat at $1,328 million [4] - Operating cash flows were $54 million, a slight decrease from $56 million in the prior-year quarter [4] Outlook - For the fiscal third quarter, Ashland expects sales to be in the range of $560-$580 million and adjusted EBITDA to be between $138-$148 million. For the full fiscal year, sales are projected to be $2,150-$2,225 million with adjusted EBITDA of $470-$500 million [5] Price Performance - Ashland's shares have increased by 4.7% over the past year, contrasting with a 9.3% decline in the industry [6]

Group 1 - Ashland reported earnings of $1.27 per share on revenue of $575 million for its fiscal second quarter, exceeding Wall Street's earnings estimate of $1.14 per share [2] - Revenue decreased by 5% year over year, with positive trends in personal care and specialty additives, while life sciences ingredient volumes were lighter [2] - The company narrowed its full-year revenue guidance to a range of $2.15 billion to $2.23 billion, down from $2.15 billion to $2.25 billion [2] Group 2 - Ashland forecasts flat to slightly increased demand in 2024, indicating signs of normalization after pandemic-related disruptions [3] - The company is focusing on higher-end products and has announced the closure of a production unit in Belgium, which will lead to volume declines but is aimed at reducing exposure to lower-margin markets [3] - Ashland's stock is trading at levels similar to three years ago, with potential for growth if end markets normalize as anticipated [3]

Financial Data and Key Metrics Changes - Overall sales declined 5% from the prior quarter to $570 million, with adjusted EBITDA for the quarter decreasing 13% to $126 million, and adjusted EPS down 11% to $1.27 [8][10][18] - Gross profit margin increased 20 basis points to 32.9%, while adjusted EBITDA margin decreased to 21.9% from 24% in the prior year [17][18] - Cash on hand was $439 million, with total available liquidity of roughly $1 billion and net debt at $889 million, representing about 2.2 turns of leverage [22] Business Line Data and Key Metrics Changes - Life Sciences sales declined by 8% to $222 million, with adjusted EBITDA decreasing by 12% to $66 million [19] - Personal Care sales increased by 1% to $169 million, with adjusted EBITDA increasing 29% to $45 million, reflecting improved sales volumes and favorable product mix [20] - Specialty Additives sales declined by 2% to $157 million, with adjusted EBITDA down 21% to $27 million [21] - Intermediates reported sales of $40 million, down 22% compared to the prior year, with adjusted EBITDA of $12 million [22] Market Data and Key Metrics Changes - Personal Care sales turned positive for the first time since Q4 fiscal year '22, with momentum in several end markets and regions [10] - Stronger demand in Personal Care was noted in the APAC region and Europe, while Life Sciences faced challenges due to normalized competitive dynamics [19][20] - Overall sales volume increased 30% sequentially, indicating a recovery trend [10] Company Strategy and Development Direction - The company focuses on executing, globalizing, innovating, and acquiring to drive profitable growth over the coming decade [14][31] - Strategic priorities include improving core businesses through productivity and innovation, and expanding into high-value segments [14][31] - Portfolio optimization activities are expected to generate 200 to 250 basis points of adjusted EBITDA margin expansion by fiscal '25 and '26 [29] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving full-year outlook, citing stable customer demand and early signs of demand normalization [15][29] - The company anticipates high single digits to low double digits revenue growth in the second half of the fiscal year, excluding portfolio optimization actions [29] - Management highlighted the importance of innovation and customer engagement in driving future growth [36][67] Other Important Information - The company has a progressive dividend policy, having grown its annual dividend every year since 2009, compounding at 18% per year [24] - Inventory levels decreased by $180 million compared to the prior year quarter, indicating prudent management of production and inventory [22][24] Q&A Session Summary Question: Thoughts on second half run rate and EBITDA margin growth into 2025 - Management indicated that normalization will be the biggest driver of performance, with expectations for increased revenue and gross profit as demand stabilizes [39] Question: Strategic plan for Avoca business challenges - Management acknowledged ongoing challenges and indicated a focus on assessing opportunities for improvement in the Avoca business line [42] Question: Customer inventory adjustments and restock cycles - Management noted that destocking is over and emphasized the focus on demand normalization rather than immediate restocking [44] Question: Pricing trends in Specialty Additives - Management expects near-term pricing pressure due to competitive dynamics but anticipates normalization trends to maintain margins in the long term [50] Question: Expected volume growth in Q3 - Management expects mid-single-digit volume growth across all businesses in Q3, with significant improvements in production volumes compared to the previous year [54]

Financial Performance - Sales for the three months ended March 31, 2024, were $575 million, a decrease of 4.6% compared to $603 million for the same period in 2023[5]. - Gross profit for the three months ended March 31, 2024, was $161 million, down 18.3% from $197 million in the prior year[5]. - Operating income decreased significantly to $21 million for the three months ended March 31, 2024, compared to $83 million for the same period in 2023, representing a decline of 74.7%[5]. - Net income for the three months ended March 31, 2024, was $120 million, an increase of 31.9% from $91 million in the same period last year[5]. - Basic earnings per share from continuing operations increased to $2.43 for the three months ended March 31, 2024, compared to $1.71 in the prior year, reflecting a growth of 42.3%[5]. - Net income for the six months ended March 31, 2024, was $147 million, an increase from $132 million in the same period of 2023, representing an increase of approximately 11.36%[9]. - Total revenue for the three months ended March 31, 2024, was $222 million, a decrease of 7.5% from $240 million in the same period of 2023[104]. - For the six months ending March 31, 2024, Ashland's total consolidated sales were $1,048 million, a decrease of 7.1% from $1,128 million in the same period of 2023[116]. Assets and Liabilities - Total current assets decreased to $1,427 million as of March 31, 2024, from $1,506 million as of September 30, 2023, a decline of 5.2%[6]. - Total assets remained relatively stable at $5,948 million as of March 31, 2024, compared to $5,939 million as of September 30, 2023[6]. - Long-term debt increased slightly to $1,328 million as of March 31, 2024, from $1,314 million as of September 30, 2023[6]. - Stockholders' equity rose to $3,134 million as of March 31, 2024, compared to $3,097 million as of September 30, 2023, indicating a growth of 1.2%[6]. - Total liabilities at fair value remained stable at $5 million as of both reporting dates[26]. Cash Flow - Total cash flows provided by operating activities from continuing operations amounted to $255 million, significantly up from $27 million in the prior year, indicating a substantial improvement in operational cash generation[9]. - Cash and cash equivalents at the end of the period increased to $439 million from $399 million, reflecting a growth of approximately 10.03%[9]. - The company reported a total cash flow provided by continuing operations of $47 million, a recovery from $(206) million in the same period last year[9]. - Free cash flow for the three months ended March 31, 2024, was $74 million, down from $140 million in the same period of 2023, indicating a decrease of 47.14%[178]. Expenses - Research and development expenses increased to $14 million for the three months ended March 31, 2024, compared to $12 million in the same period last year, reflecting a growth of 16.7%[5]. - Selling, general and administrative expenses increased by $27 million in the current quarter, totaling $106 million, with expenses as a percentage of sales rising to 18.4% from 13.1%[144]. - Year-to-date selling, general and administrative expenses increased by $17 million, totaling $189 million, with expenses as a percentage of sales increasing to 18.0% from 15.2%[145]. - The company incurred $27 million and $49 million in accelerated depreciation for product line optimization activities during the three and six months ended March 31, 2024, respectively[22]. Segment Performance - Life Sciences segment sales for the three months ended March 31, 2024, were $222 million, down from $240 million in the same period of 2023, representing a decline of 7.5%[116]. - North America sales in the Life Sciences segment increased to $73 million for the three months ended March 31, 2024, up from $61 million in the same period of 2023, representing a 19.7% increase[104]. - Personal Care segment sales increased to $169 million in Q1 2024 from $167 million in Q1 2023, showing a slight growth of 1.2%[116]. - Specialty Additives segment sales decreased to $157 million in Q1 2024 from $161 million in Q1 2023, reflecting a decline of 2.5%[116]. - Intermediates segment sales dropped to $40 million in Q1 2024 from $51 million in Q1 2023, a decrease of 21.6%[116]. Tax and Regulatory Matters - The effective tax rate for the three months ended March 31, 2024, was a benefit of 612%, influenced by a net $102 million from favorable tax discrete items, while the six-month rate was a benefit of 610% with a net $126 million from similar items[60]. - The company expects a decrease in the amount of accrual for uncertain tax positions of between $4 million and $5 million for continuing operations in the next twelve months[63]. Stock and Shareholder Returns - The company repurchased $100 million of common stock during the period, down from $142 million in the previous year, reflecting a reduction in share buyback activity[9]. - Ashland's board authorized a new $1 billion stock repurchase program in June 2023, with $900 million remaining available for repurchase as of March 31, 2024[92]. - Cash dividends declared per common share increased to $0.385 for the first and second quarters of fiscal 2024, compared to $0.335 for the same quarters in fiscal 2023, marking a 14.9% increase[95]. Environmental and Legal Matters - Ashland's asbestos reserve decreased to $263 million at March 31, 2024, from $281 million at September 30, 2023, reflecting a reserve adjustment of $9 million[71]. - The company recorded a total of 42 open asbestos claims at the end of the six months ended March 31, 2024, unchanged from the beginning of the year[70]. - Ashland has identified 53 sites under Superfund or similar laws requiring environmental remediation efforts[83].